GIC Laddering

GIC laddering is an investment strategy that allows you to spread your money across a shorter and longer term GICs (from 1-5 years or 1-3 years).  Laddering staggers the maturity dates of your GICs to reduce the risk of interest rate changes, while providing you with ongoing access to a portion of your funds on an annual basis.  In a rising interest rate environment, you can reinvest your maturing GICs at a higher rate, while in a declining interest rate environment the remainder of your GICs are protected. This strategy also provides access to a portion of your GIC Funds year – should you ever need it.

Key Benefits:

Flexibility – take advantage of rising interest rates to reinvest
Reduced Risk – offset the impact of declining interest rates.
Liquidity – access a portion of your GIC funds each year without penalty.  Plus, staggered maturity dates ensures ongoing liquidity to meet your cash flow needs.

A Sample of GIC laddering at work

  • With an initial investment of $25,000 you can buy the five GICs of $5,000 each, with staggered maturity terms ranging from 1 to 5 years.
  • Each year one GIC will mature and you can reinvest the money into a new 5 year GIC.
  • If interest rates increase, you can reinvest at a higher interest rate.
  • If interest rates decrease, your other GICs continue to earn at a higher interest rate.
 
1st Year
2nd Year
3rd Year
4th year
5th year
Purchase a $5,000                              1 Year GIC
On maturity reinvest in a 5 year GIC
Purchase a $5,000                              2 Year GIC
On maturity reinvest in a 5 year GIC
Purchase a $5,000                              3 Year GIC
On maturity reinvest in a 5 year GIC
Purchase a $5,000                              4 Year GIC
On maturity reinvest in a 5 year GIC
Purchase a $5,000                              5 Year GIC
On maturity reinvest in a 5 year GIC

*** For Client’s looking for reasonable GIC liquidity, consider a 2nd GIC ladder 6 months after the 1st and over the following 5 years.  Every 6 months you have equal access to your capital/principal upon maturity!

 

Contact us today to discuss GIC Laddering at 519-744-3020 or email info@belmontvillagefinancial.com

 

Share this information...
Email this to someoneShare on FacebookTweet about this on TwitterShare on LinkedInShare on Google+Share on RedditPin on Pinterest